BigE, you brought up valuations, so now you have my interest. I apologize in advance to those who don't care to work through numbers with me.
While a guaranteed return may sound good given that the company is still pre-revenue, I think $0.50/share or even $1/share is pretty cheap to sell out. That's only ~$100M-$200M valuation of the company. The other public competitor is currently valued at $364M and was ~$600M when their prospects were a little brighter.
Other private competitors have received venture capital averaging ~$100M, which tells me their investors see a large potential market, giving them potential rewards of say $500M-$1B when they cash in. Market research reports estimate the annual QD market between $1.5B-3.5B by 2018, primarily for optoelectronics only, so there's lots of growth expected in the next 4 years, with QMC positioned well to scale up to support that kind of growth. That also leaves lots of other applications out of the mix for potential growth of the QD market.
Looking at the valuation in terms of kg QD quantity, a $200M valuation could be backed out to ~$20M-$30M in sales depending on the P/S ratio you think reasonable. If you prefer P/E, then start with a 20 P/E (pretty low for an expected high growth company) and say $10M earnings (BTW, the first $5M would be tax-free due to an offset), which fits reasonably well with the $20M-$30M sales. So, using $30M sales and current QD pricing of ~2M/kg, that's only 15kg of sales.
I did not hold on to my investment in QMC this long hoping the company would be sold for a price equating to the first 15kg of sales even though I would realize a nice gain right now. The only reason I could see to sell at such a low valuation is if I thought QMC's QD prospects were dimming (pun intended). Of course, I see it as just the opposite now that reactor funding has been obtained and the first reactor is about to arrive.
While it may seem ideal to take the short term guarantee, the first reactor is so close to getting the company from pre-revenue to revenues, now is not the time to sell out IMO, at least for such a low valuation. It has been impossible to fairly value the company with no sales and no projections on production, but that could change before the end of this year. Initial sales may be small, but at very attractive prices. Even the very small 2g/hr reactor could make 40-44 g/day (giving 2 hr downtime), which could make 15kg in 340 days. Not enough to blow you away, but arguably enough to support the $1/share valuation on just the first little reactor.
The initial sales should put a much larger reactor within reach and that could take the production and the valuation up quite a bit. The scalability of the reactors is the key. The company should be able to scale up as needed as the market grows, so if more than 15kg is needed in the next year, they get a larger reactor, anywhere up to the 2kg/hr size mentioned in the 10K/10Qs.
The company has stated a goal to produce 100kg/day (more as needed). While the per kg price will not stay at $2M/kg for such volume, it will still be quite valuable. Conservatively say 5% of that price at $100k/kg. That would equate to $10M/day or $250M/yr. Sure, it isn't likely to happen this year, but if enough data comes forth this year to be able to see that level coming in a couple years, what would the company be worth?
Certainly well over $1/share and likely several multiples of it.
No, I don't think I would be interested in selling out for even $1/share at this point in time just when the future is getting brighter. I sure hope Steve isn't either.
